Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > SEC

SEC Standard of Conduct Proposal Faces ‘Arduous Path’: Fi360’s Aikin

Your article was successfully shared with the contacts you provided.

While the Securities and Exchange Commission has taken “positive steps with good intent” in its recently released standard of conduct proposal for brokers and advisors, “there are serious problems in the rule,” and it’s likely the rule “will never fully come to pass,” Blaine Aikin, executive chairman of the fiduciary education, training and technology firm Fi360, told attendees Wednesday at the firm’s annual conference in San Diego.

Fi360, Aikin said, foresees “a long and arduous path” for the SEC’s rule, which the regulatory agency approved on April 18 and is out for a 90-day comment period.

“When you look at the dynamics of the situation, there are obstacles to the [SEC] rule gaining consensus,” Aikin told ThinkAdvisor in separate comments.

“The commissioners expressed significant reservations” about the proposal, he explained. And “there are avenues for people to challenge the rule [in the plan’s] economic analysis, how the rule is drafted and the elements of it, as well as the difficulty in navigating the different points of views at the Commission” regarding the proposed rule.

Barring court challenges, the SEC’s rule proposal wouldn’t likely be finalized until 2019, with the rule’s implementation anticipated in 2020, Aikin said.

However, certain aspects of the SEC’s conduct plan, namely Regulation Best Interest for brokers, “will see pushback,” he said.

“The big change” in the SEC’s proposed standard of conduct proposal is the introduction of the “new best interest standard” for brokers, Aikin told attendees. “We look at this and scratch our head because that’s [best interest concept has] been grounded in fiduciary.”

Indeed, SEC Commissioners Hester Peirce and Kara Stein both expressed concerns at the April 18 SEC meeting over the Regulation Best Interest title, with Peirce calling it a “suitability plus” rule and Stein saying it was “mislabeled,” Aikin noted.

At the Fi360 event, Joe Borg — president of the North American Securities Administrators Association and Alabama securities director — said  that while state securities regulators have been waiting eight years for a “fiduciary” proposal and it’s a “good positive first step,” the proposal does not “raise the suitability standard in a measurable way.”

Borg explained, “I feel like we have a skeleton [with the SEC proposal], and we need to put a lot of meat on the bones.”

Dale Brown, president and CEO of the Financial Services Institute, said that while FSI is “still plowing through” the nearly 1,000-page SEC standard of conduct plan, the SEC has set out “very helpful steps in the right direction” and is “asking lots of good questions.”

While in “many respects it’s eight years too late” for the SEC’s proposal, “it’s finally here,” Brown said.  “We now have something tangible to react to and [to] help the SEC move toward a final product.”

Fi360’s Aikin stated that having a “fiduciary best-interest standard” under the Investment Advisers Act and a “non-fiduciary best-interest” standard under the SEC’s proposed Regulation Best Interest “will be problematic,” adding that while there’s been investor confusion about the term fiduciary, “we’re really not going to have differentiation.”

— Check out AARP, States File to Intervene in DOL Fiduciary Appeal on ThinkAdvisor.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.